The world economic system is now creating disagreement and discord between nations, writes Gideon Rachman in ‘ Zero-Sum World ’ (www.atlantic-books.co.uk). He adds that new rivalries are emerging with the decline of American power; and the world’s major powers are finding that they cannot solve the big global problems such as climate change and nuclear proliferation, terrorism and failed states, energy and food security.
Markets for ideas and shares
Looking back at the crash of 2008 – which was a disorienting experience for people who had spent the last thirty years arguing for the virtues of free-market economics, globalisation and western democratic values – the author observes that the market for ideas is a bit like the market for shares. In both cases, a long run of success can lead to a period of ‘irrational exuberance’ and an over-shoot, he explains.
“After a generation of success, the promoters of free-market economics and democratic politics succumbed to intellectual arrogance and hubris. They pushed their ideas to their logical conclusions and then well beyond them. A faith in markets degenerated into allowing global investment banks to bet billions of dollars on unregulated securities.”
Keep globalisation alive
In a chapter titled ‘Saving the world,’ Rachman cautions that a breakdown of globalisation would slow the world economy in ways that would damage the livelihoods of ordinary people all over the world. He warns that trade wars would also embitter international relations and strike directly at the commercial and investment ties that have created a web of shared interests between the world’s major powers over the last thirty years.
In the author’s view, all the world’s major economic powers bear responsibility for keeping the system that benefits them all intact. To China, his advice is that it needs to let its currency rise in value against the dollar – and not just by token amounts – to ward off protectionist sentiment in America. “It should also recognise that a stronger currency, whose value is determined by the market, reflects an increase in the nation’s wealth that will make ordinary Chinese richer in a very direct way.”
Doha cliché
And India, which Rachman faults for its ‘particularly obstructive role in the Doha round of international trade talks,’ has to recognise that it has been among the biggest beneficiaries of globalisation and therefore has a huge stake in preserving and extending the system, he says. Also coming under his ire is Europe’s baroque system of agricultural subsidies – long an embarrassment, but now a major impediment to a new deal at the World Trade Organisation.
Calling for ‘completion of the Doha round’ has become a tiresome cliché of international diplomacy, and it is the equivalent of praising motherhood and Apple pie, frets Rachman. He urges, however, that while cynicism about the Doha round is certainly justified, its completion would be really valuable. “For if the world’s leaders could agree to a new round of trade opening, they would send a vital signal that they still believe a ‘win-win world’ is possible.”
Too powerful messages to ignore.
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